Why It's a Good Idea to Track Your Budget

December 4, 2019

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Kristen & Ed Judd

Kristen & Ed Judd

Executive Vice Presidents

11098 Raleigh Ct

Westminster, CO 80031

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October 23, 2019

Top Reasons Why People Buy Term Life Insurance

Top Reasons Why People Buy Term Life Insurance

These days, most families are two-income households.

That describes 61.9% of U.S. families as of 2017. If that describes your family (and the odds are good), do you have a strategy in place to cover your financial obligations with just one income if you or your spouse were to unexpectedly pass away?

Wow. That’s a real conversation-opener, isn’t it? It’s not easy to think about what might happen if one income suddenly disappeared. (It might seem like more fun to have a root canal than to think about that.) But having the right coverage “just in case” is worth considering. It’ll give you some reassurance and let you get back to the fun stuff… like not thinking about having a root canal.

If you’re interested in finding out more about Term insurance and how it may help with your family’s financial obligations, read on…

Some Basics about Term Insurance
Many of life’s financial commitments have a set end date. Mortgages are 15 to 30 years. Kids grow up and (eventually) start providing for themselves. Term life insurance may be a great option since you can choose a coverage length that lines up with the length of your ongoing financial commitments. Ideally, the term of the policy will end around the same time those large financial obligations are paid off. Term policies also may be a good choice because in many cases, they may be the most economical solution for getting the protection a family needs.

As great as term policies can be, here are a couple of things to keep in mind: a term policy won’t help cover financial commitments if you or your spouse simply lose your job. And term policies have a set (level) premium during the length of the initial period. Generally, term policies can be continued after the term expires, but at a much higher rate.

The following are some situations where a Term policy may help.

Pay Final Expenses
Funeral and burial costs can be upwards of $10,000. However, many families might not have that amount handy in available cash. Covering basic final expenses can be a real burden, especially if the death of a spouse comes out of the blue. If one income is suddenly gone, it could mean the surviving spouse would need to use credit or liquidate assets to cover final expenses. As you would probably agree, neither of these are attractive options. A term life insurance policy can cover final expenses, leaving one less worry for your family.

Pay Off Debt
The average household in the U.S. is carrying nearly $140,000 in debt, and it’s clear that many families would be in trouble if one income is lost.

Term life insurance can be closely matched to the length of your mortgage, which helps to ensure that your family won’t lose their home at an already difficult time.

But what about car payments, credit card balances, and other debt? These other debt obligations that your family is currently meeting with either one or two incomes can be put to bed with a well-planned term life policy.

Income Protection
Even if you’ve planned for final expenses and purchased enough life insurance coverage to pay off your household debt, life can present many other costs of just… living. If you pass unexpectedly, the bills will keep rolling in for anyone you leave behind – especially if you have young children. Those day-to-day living costs and unexpected expenses can seem to multiply in ways that defy mathematical concepts. (You know – like that school field trip to the aquarium that no one mentioned until the night before.)

But Wait, There’s More
A well-planned term life insurance policy can provide other benefits as well, including living benefits that can help prevent medical expenses from wreaking havoc on your family’s financial plan if you become critically ill. One note about the living benefits policies, though: If the critical and chronic illness features are used, the face value of the policy is reduced. But which might be more prepared to take a financial hit: the face value of the life insurance policy that just helped you cover your medical expenses… or your child’s college fund?

In some cases, policies with built in living benefits may cost more than a standard term policy, but it may still cost less than permanent insurance policies! And because a term policy is in force only during the years when your family needs the most protection, premiums can be lower than for other types of life insurance.

Term life insurance can provide income protection to help keep your family’s financial situation solid, and help things stay as “normal” as they can be after a loss.

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October 21, 2019

Is Survivorship Life Insurance Right For You?

Is Survivorship Life Insurance Right For You?

A survivorship life insurance policy is a type of joint insurance policy (a policy built for two).

You may not have thought much about that type of insurance before, or even knew it existed. But joint policies, especially survivorship policies, are important to consider because they can provide for heirs, settle estates, and pay for final expenses after both spouses have passed.

Most joint life insurance policies are what’s known as “first to die” policies. As the unambiguous nickname suggests, a first to die policy is designed to provide for the remaining spouse after the first passes.

A joint life insurance policy is a time-tested way of providing for a remaining spouse. But without careful planning, a typical joint life policy might leave a burden for surviving children or other family members.

A survivorship life insurance policy works differently than a first to die policy. Also called a “last to die” policy, a survivorship policy provides a death benefit only when both insured spouses have passed. A survivorship policy doesn’t pay a death benefit to either spouse but rather to a separate named beneficiary.

You’ll find survivorship life insurance referred to as:

  • Joint Survivor Life Insurance
  • Second-to-Die Life Insurance
  • Variable Survivorship Insurance

Survivorship life insurance policies are sometimes referred to by different names, but the structure is the same in that the policy only pays a benefit after both people insured by the policy have died.

Reasons to Buy Survivorship Life Insurance
We all have our reasons for buying a life insurance policy, and often have someone in mind who we want to protect and provide for. Those reasons often dictate the best type of policy – or the best combination of policies – that can meet our goals.

A survivorship policy is well-suited to any of the following considerations, perhaps in combination with other policies:

  • Final expenses
  • Estate taxes
  • Lingering medical expenses
  • Payment of debt
  • Transfer of wealth

It’s also most common for a survivorship life insurance policy to be a permanent life insurance policy. This is because the reasons for using a survivorship policy, including transfer of wealth, are usually better served by a permanent life policy than by a term insurance policy. (A term life insurance policy is only in force for a limited time and doesn’t build any cash value.)

Benefits of Survivorship Life Insurance

  • A survivorship life policy can be an effective way to transfer wealth as part of a financial strategy.
  • Life insurance can be difficult to purchase for individuals with certain health conditions. Because a survivorship life insurance policy is underwriting coverage based on two individuals, it may be possible to purchase coverage for someone who couldn’t easily be insured otherwise.
  • As a permanent life insurance policy, a survivorship life policy builds cash value that can be accessed if needed in certain situations.
  • Costs can be lower for a survivorship life policy than insuring two spouses individually.

The good news is that life insurance rates are more affordable now than in the past. That’s great! But keep in mind, your life insurance policy – of any type – will probably cost less now than if you wait for another birthday to pass for either spouse insured by the policy.

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October 7, 2019

Mortgage Protection: One Less Thing To Worry About

Mortgage Protection: One Less Thing To Worry About

How many things do you worry – er, think – about, each day? 25? 50? 99?

Here’s an opportunity to check at least one of those off your list. Read on…

Think back to when you were involved in the loan process for your home. Chances are good that at some point during those meetings, a smiling salesperson mentioned “mortgage protection”.

With so many other terms flying around during the conversation, like “PMI” and “APRs”, and so much money already committed to the mortgage itself – and the home insurance, and the new furniture you would need – you might have passed on mortgage protection.

You had (and hopefully still have) a steady job and a life insurance policy in place, so why would you need additional protection? What could go wrong?

Before we answer that, let’s clear up some confusion.

Mortgage Protection Insurance is not PMI
These two terms are often used interchangeably, but they are not the same thing.

Both Private Mortgage Insurance (PMI) and Mortgage Protection are insurance, but they do different things. PMI is a requirement for certain loans because it protects the lender if your home is lost to foreclosure.

Essentially, with PMI you’re buying insurance for your lender if they determine your loan is more risky than average (for example, if you put less than 20% down on your home and your credit score is low).

Mortgage protection, on the other hand, is insurance for you and your family – not your lender.

There are several types of mortgage protection, but generally you can count on it to protect you in the following ways:

  • Pay your mortgage if you lose your job
  • Pay your mortgage if you become disabled
  • Pay off your mortgage if you die

Say, That Sounds Like Life Insurance.
Not exactly. Mortgage protection actually can cover more situations than a life policy would cover. Life insurance won’t help if you lose your job and it won’t help if you become disabled. Mortgage protection bundles all these protections into one policy – so you don’t need multiple policies to cover all the problems that could make it difficult to pay your mortgage each month. (Hint: A life insurance policy would be a different part of your overall financial plan and often has its own separate goals.)

How Does Mortgage Protection Work?
A mortgage protection policy is usually a “guaranteed issue” policy, meaning that many of the roadblocks to purchasing a life insurance policy, such as health considerations and exams, wouldn’t be there.

If you lose your job or become disabled, your policy will pay your mortgage for a limited amount of time, giving you the opportunity to find work or to make a backup plan. Again, your house is saved, your family still has a roof over their heads, and you’re a hero for thinking ahead. Accidents happen and people lose their jobs every day. Mortgage protection is there to catch you if you fall.

One More Thing…
A mortgage protection policy is a term policy, so you don’t need to keep paying premiums after your house is paid off.

Now that you know a little bit more about mortgage protection policies, have those 99 worries ticked down to 98? Reaching out to me for guidance on your financial worries could help you make that number smaller and smaller… 97… 96… 95…

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September 30, 2019

So You Want to Buy Life Insurance for Your Parents...

So You Want to Buy Life Insurance for Your Parents...

Playing Monopoly as a young kid might have given you some strange ideas about money.

Take the life insurance card in the Community Chest for instance. That might give the impression that life insurance is free money to burn on whatever the next roll of the dice calls for.

In grown-up reality, life insurance proceeds are often committed long before a policy holder or beneficiary receives the check they’re waiting for. Final expenses, estate taxes, loan balances, and medical bills all compete for whatever money is paid out on the policy.

If your parents don’t have a policy or if you think their coverage won’t be enough, you can plan ahead and buy a life insurance policy for them. Your parents would be the insured, but you would be the policy owner and beneficiary.

A few extra considerations when buying a life insurance policy for your parents:

  • Insurable interest still applies. If your parents already have a significant amount of life insurance coverage, you may find that some insurers are reluctant to issue more coverage. Insurable interest requires that the amount of coverage doesn’t exceed the potential financial loss. (In other words, if your parents already have enough coverage, a company may not want to insure them for more.)
  • Age can limit coverage amounts. Assuming that your parents are older and no longer generating income, coverage amounts will be limited. If your parents are younger and still have 20 or more years ahead of them before they retire, they can qualify for a higher amount of coverage.
  • Age can limit policy types. Certain types of life insurance aren’t available when we get older, or will be limited in regard to length of coverage. Term life insurance is a good example. Your options for term life insurance will be fewer once your parents are into their sixties. The available term lengths will also be shorter. Policies with a 30-year term aren’t commonly available over the age of 50.

How Can I Use The Life Insurance For My Parents?
Depending on the amount of coverage you buy – or can buy (remember, it may be limited), you could use the policy to plan for any of the following:

  • Final expenses: You can expect funeral costs to run from $10,000 to $15,000, maybe more.
  • Estate taxes: Estate taxes and so-called death taxes can be an unpleasant surprise in many states. A life insurance policy can help you plan for this expense which could come at a time when you’re not flush with cash.

Can Life Insurance Pay The Mortgage Or Car Loans?
It isn’t uncommon for parents to pass away with some remaining debt. This might be in the form of a mortgage, car loans, or even credit card debt. These loan balances can be covered in whole or in part with a life insurance policy.

In fact, outstanding loan balances are a very big consideration. Often, people who inherit a house or a car may also inherit an additional mortgage payment or car payment. It might be wonderful to receive such a generous and sentimental gift, but if you’re like many families, you might not have the extra money for the payments in your budget.

Even if the policy doesn’t provide sufficient coverage to retire the debt completely, a life insurance policy can give you some breathing room until you can make other arrangements – like selling your parents’ house, for example.

You Control The Premium Payments.
If you buy a life insurance policy for your parents, you’ll know if the premiums are being paid because you’re the one paying them. You probably wouldn’t want your parents to be burdened with a life insurance premium obligation if they’re living on a fixed income.

Buying insurance for your parents is a great idea, but many people don’t consider it until it’s too late. That’s when you might wish you’d had the idea years ago. It’s one of the wisest things you can do, particularly if your parents are underinsured or have no life insurance at all.

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September 18, 2019

Is Your Employer-Provided Life Insurance Enough?

Is Your Employer-Provided Life Insurance Enough?

Just because your company provides you with free life insurance coverage doesn’t mean you’re fully protected.

While it certainly doesn’t hurt to have, it may not be enough to provide for your family in the event of a tragedy.

For the first time ever, more Americans have employer-provided life insurance (108 million) than have individual life insurance coverage (102 million), according to a new LIMRA study. This is important especially during Life Insurance Awareness month to make sure you’re aware that typically life insurance through your job is not portable. Which means you can’t take it with you. Everyone should make sure they have individually owned insurance to protect their family just in case they switch jobs or lose their job or potentially start your own company.

How employer-provided life insurance works.
A life insurance policy from your employer is typically a group plan that’s offered to you and your co-workers. Your policy is held by the company, and they’ll often pay most if not all the premium costs. The amount of insurance you’ll receive varies, but it’s normally one to two times your annual salary.

Problems with employer-provided life insurance.
A $50,000 payout, for example, may seem like a lot. But you may notice a problem when you stop thinking in terms of numbers on paper and look at how long the insurance money would last. You go from $50,000 per year to just $50,000, period! A life insurance benefit is essentially buying your family time to grieve and plan for their future in your absence. That might mean looking for new jobs, adjusting to a single-income lifestyle, taking out student loans, and so on.

If your employer-provided policy just matches your annual salary, your loved ones would only be covered for a single year as they go through the process of readjustment (assuming their spending habits don’t change and they don’t encounter any emergencies). In fact, 5 to 10 times your annual income is considered a reasonable amount of insurance for just this reason; it gives your loved ones plenty of time to figure things out.

Another problem with an employer-provided life insurance policy is that it depends on your employment status. If you leave that job (voluntarily or involuntarily), what might happen to your family if they are left unprotected? While employer-provided life insurance is definitely a perk, it often might not be enough.

Alternatives to employer-provided life insurance.
That’s why considering an individual plan is so important. It may not be provided by your employer, but you’ll get what you pay for – a safety net for the ones you love and the time they’ll need to recover… regardless of where you’re working.

Have questions? Feel free to contact me! I would love to help you prepare your insurance strategy and help protect your family’s future.

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September 16, 2019

Your Life Insurance Rate & You: Pre-Existing Conditions

Your Life Insurance Rate & You: Pre-Existing Conditions

What’s a fact that you know is a fact… but you kind of brush aside?

  • That your buddy never ever washes that game jersey?
  • That those crazy-expensive yoga pants aren’t really for yoga?
  • That definitely wasn’t chicken in that road trip hunger-attack pit-stop sandwich?

An interesting thing about all of those uncomfortable facts are the results.

  • That dirty jersey is a good luck charm – it helps the team win every time!
  • Those yoga pants are the best lounging investment ever made.
  • … There’s no way to rescue that last one, sorry!

The idea of brushed aside facts applies to life insurance, too… But perhaps brushing aside the facts feels necessary to many uninsured people in order to get a good night’s sleep.

One fact that may keep people with pre-existing conditions up at night? The younger and healthier a person is, the easier they are to insure. For example, a healthy 30-year-old can get a $250,000 term life insurance policy for less than $14 a month.

Why might this keep people with pre-existing conditions up at night? It can be more difficult to get an affordable rate for a life insurance policy when you have a pre-existing condition. For the 1 in 5 non-elderly Americans affected by a pre-existing health condition, this is troubling news. That’s 25 million Americans without a way to provide for their families if their cancer returns or if a congenital heart defect acts up or a degenerative disease suddenly progresses at a rapid rate.

If you have a pre-existing condition, I’m here to help!

The advantage of working with me? You are not confined to the offerings of one insurance provider. There are multiple possible solutions and multiple companies that you may be able to choose from. This isn’t a guarantee for success, but I’m willing to help and walk down this road with you. Give me a call today, and together we can explore your options – and that’s a fact you don’t need to brush aside.

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June 24, 2019

The Shelf Life of Financial Records

The Shelf Life of Financial Records

When you finally make the commitment to organize that pile of financial documents, where are you supposed to start?

Maybe you’ve tried sorting your documents into this infamous trio: the Coffee Stains Assortment, the Crumpled-Up Masses, and the Definitely Missing a Page or Two Crew.

How has this system been working for you? Is that same stack of disorganized paper just getting shuffled from one corner of your desk to the top of your filing cabinet and back again? Why not give the following method a try instead? Based on the Financial Industry Regulatory Authority (FINRA)’s “Save or Shred” ideas, here’s a list of the shelf life of some key financial records to help you begin whittling that stack down to just what you need to keep. (And remember, when disposing of any financial records, shred them – don’t just toss them into the trash.)

1. Keep These Until They Die: Mortgages, Student Loans, Car Loans, Etc.
These records are the ones to hang on to until you’ve completely paid them off. However, keeping these records indefinitely (to be on the safe side) is a good idea. If any questions or disputes relating to the loan or payment of the loan come up, you’re covered. Label the records clearly, then feel free to put them at the back of your file cabinet. They can be out of sight, but make sure they’re still in your possession if that info needs to come to mind.

2. Seven Years in the Cabinet: Tax-Related Records.
These records include your tax returns and receipts/proof of anything you might claim as a deduction. You’ll need to keep your tax documents – including proof of deductions – for 7 years. Period. Why? In the US, if the IRS thinks you may have underreported your gross income by 25%, they have 6 whole years to challenge your return. Not to mention, they have 3 years to audit you if they think there might be any good faith errors on past returns. (Note: Check with your state tax office to learn how long you should keep your state tax records.) Also important to keep in mind: Some of the items included in your tax returns may also pull from other categories in this list, so be sure to examine your records carefully and hang on to anything you think you might need.

3. The Sixers: Property Records.
This one goes out to you homeowners. While you’re living in your home, keep any and all documents from the purchase of the home to remodeling or additions you make. After you sell the home, keep those documents for at least 6 more years.

4. The Annually Tossed: Brokerage Statements, Paycheck Stubs, Bank Records.
“Annually tossed” is used a bit lightly here, so please proceed with caution. What can be disposed of after an annual review are brokerage statements, paycheck stubs (if not enrolled in direct deposit), and bank records. Hoarding these types of documents may lead to a “keep it all” or “trash it all” attitude. Neither is beneficial. What should be kept is anything of long-term importance (see #2).

5. The Easy One: Rental Documents.
If you rent a property, keep all financial documents and rental agreements until you’ve moved out and gotten your security deposit back from the landlord. Use your deposit to buy a shredder and have at it – it’s easy and fun!

6. The Check-‘Em Againsts: Credit Card Receipts/Statements and Bills.
Check your credit card statement against your physical receipts and bank records from that month. Ideally, this should be done online daily, or at least weekly, to catch anything suspicious as quickly as possible. If everything checks out and there are no red flags, shred away! (Note: Planning to claim anything on your statement as a tax deduction? See #2.) As for bills, you’re in the clear to shred them as soon as your payment clears – with one caveat: Bills for any big-ticket items that you might need to make an insurance claim on later (think expensive sound system, diamond bracelet, all-leather sofa with built-in recliners) should be held on to indefinitely (or at least as long as you own the item).

So even if your kids released their inner Michelangelo on the shoebox of financial papers under your bed, some of them need to be kept – for more than just sentimental value. And it’s vital to keep the above information in mind when you’re considering what to keep and for how long.

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May 29, 2019

3 More "I Dos" for Newlyweds

3 More "I Dos" for Newlyweds

Congratulations, newlyweds!

“To have and to hold, from this day forward…”   At a time like this, there are 3 more “I dos” for you to consider:

1. Do you have life insurance?
Any discussion about life insurance is going to start with this question, so let’s get it out of the way! As invigorated as people feel after finding the love of their life…let’s face it – they’re not invincible. The benefits of life insurance include protecting against loss of income, covering funeral expenses, gaining potential tax advantages, and having early access to money. Many of these benefits can depend on what kind of life insurance you have. Bottom line: having life insurance is a great way to show your love for years to come – for better OR worse.

2. Do you have the right type and amount of life insurance?
Life insurance policies are not “one size fits all.” There are different types of policies with different kinds of coverage, benefits, and uses. Having the right policy with adequate coverage is the key to protecting your new spouse in the event of a traumatic event – not just loss of life. Adequate life insurance coverage can help keep you and your spouse afloat in the case of an unexpected disabling injury, or if you’re in need of long term care. Your life with your spouse isn’t going to be one size fits all, and your life insurance policy won’t be either – for richer or poorer.

3. Do you have the right beneficiaries listed on your policy?
This question is particularly important if you had an existing policy before marriage. Most newlyweds opt for listing each other as their primary beneficiary, and with good reason: listing the correct beneficiary will help ensure that any insurance payout will get delivered to them– in sickness and in health.

If you couldn’t say “I do” to any or all of these questions, contact me. It would be my pleasure to assist you newlyweds – or not-so-newlyweds – with a whole NEW way to care for each other: tailored life insurance coverage – ’til death do you part!

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May 15, 2019

3 Advantages to Being the Early Bird

3 Advantages to Being the Early Bird

Extra-large-blonde-roast-with-a-double-shot-of-espresso, anyone?

As the old saying goes, “The early bird catches the worm.” But not everyone is an early riser, and getting up earlier than usual can throw off a night owl’s whole day.

But there are a couple of things that, if started early in life (and with copious amounts of caffeine, if you’re starting early in the day, too), could benefit you greatly later in life. For example, learning a second language.

The optimal age range for learning a second language is still up for debate among experts, but the consensus seems to be “the younger you start, the better.” It’s a good idea to start early – giving your brain an ample amount of time to develop the many agreed upon benefits of being bilingual that don’t show up until later in life:

  • Postponed onset of dementia and Alzheimer’s (by 4.5 years)
  • Much more efficient brain activity – more like a young adult’s brain
  • Greater cognitive reserve and ability to cope with disease

Imagine combining that increased brain power with a comfortable retirement – an important goal to start working towards early in life!

Here are 3 big advantages to starting your retirement savings early:

1. Less to put away each month.
Let’s say you’re 40 years old with little to no savings for retirement, but you’d like to have $1,000,000 when you retire at age 65. Twenty-five years may seem like plenty of time to achieve this goal, so how much would you need to put away each month to make that happen?

If you were stuffing money into your mattress (i.e., saving with no interest rate or rate of return), you would need to cram at least $3,333.33 in between the layers of memory foam every month. How about if you waited until you were 50 to start? Then you’d need to tuck no less than $5,555.55 around the coils. Every. Single. Month.

A savings plan that aggressive is simply not feasible for a majority of North Americans. Nearly half of Canadians are just getting by, living paycheck-to-paycheck. So it makes sense that the earlier you start saving for retirement, the less you’ll need to put away each month. And the less you need to put away each month, the less stress will be put on your monthly budget – and the higher your potential to have a well-funded retirement when the time comes.

But what if you could start saving earlier and apply an interest rate? This is where the second advantage comes in…

2. Power of compounding.
The earlier you start saving for retirement, the longer amount of time your money has to grow and build on itself. A useful shortcut to figuring out how long it would take your money to double is the Rule of 72.

Never heard of it? Here’s how it works: Take the number 72 and divide it by your annual interest rate. The answer is approximately how many years it will take for money in an account to double.

For example, applying the Rule of 72 to $10,000 in an account at a 4% interest rate would look like this:

72 ÷ 4 = 18

That means it would take approximately 18 years for $10,000 to grow to $20,000 ($20,258 to be exact).

Using this formula reveals that the higher the interest rate, the less time it’s going to take your money to double, so be on the lookout for the highest interest rate you can find!

Getting a higher interest rate and combining it with the third advantage below? You’d be on a roll…

3. Lower life insurance premiums.
A well-tailored life insurance policy may help protect retirement savings. This is particularly important if you’re outlived by your spouse as he or she approaches their retirement years.

End-of-life costs can deal a serious blow to retirement savings. If you don’t have a strategy in place to help cover funeral expenses and the loss of income, the money your spouse might need may have to come out of your retirement savings.

One reason many people don’t consider life insurance as a method of protecting their retirement is that they think a policy would cost too much.

How much do you think a $250,000 term life insurance policy would cost for a healthy 30-year-old?

Less than $14 per month. That’s a cost that would easily fit into most budgets!

You may still need a little caffeine for the extra kick to get an early start on powering up your brain (or your retirement savings), but sacrificing a few brand-name cups of coffee per month could finance a well-tailored life insurance policy that has the potential to protect your retirement savings.

Contact me today, and together we can work on your financial strategy for retirement, including what kind of life insurance policy would best fit you and your needs. As for your journey to the brain-boosting benefits of being bilingual – just like with retirement, it’s never too late to start. And I’ll be here to cheer you on every step of the way!

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May 8, 2019

What is your #1 financial asset?

What is your #1 financial asset?

What is your #1 financial asset? It’s not your house, your retirement fund, or your rare baseball card collection gathering dust.

Your most valuable financial asset is YOU!
Today – Labor Day, the unofficial last day of summer – let’s look at ways you can develop your skills and outlook in the workforce as we move from summertime vacation mode into finishing 2018 strong.

You might be savvy at home improvement, you might be a whiz with your finances, or you might have the eye to spot a hidden treasure at a yard sale, but how do you increase your value as a laborer in the workforce? One of the top traits of successful people is that they come up with a plan and they execute. Waiting for things to happen or taking the crumbs life tosses their way isn’t on their to-do list. Whether you’re dreaming of a secure future for yourself and your family, or if you want to build a career that enables you to help others down the road (or both!), the path to your goal and how fast you get there is up to you.

Increase your value as an employee
Working for someone else doesn’t have to feel like a prison sentence. In a recent study, nearly 60% of entrepreneurs worked full time as an employee for someone else while planning and building their own business on the side. Being employed is a chance to learn alongside experienced mentors, and prime time to experiment with how you can best add value. In many cases, successful entrepreneurs spent their time in the workforce amassing a wealth of information on how businesses are run, making mental notes on what doesn’t work, and practicing what can be done better.

View your time as an employee as an opportunity to hone your problem solving skills. It’s a mindset – one that can make you a more valuable employee and prepare you for great things later. Being seen as a problem solver can grant you more opportunity for promotions, pay increases, greater responsibility, and perhaps most importantly, open up more chances for life-enriching experiences.

Build your financial strategy
While you’re working to increase your value as a laborer, you’ll benefit from steady footing before taking your next big step. This is where building a solid financial strategy comes into play. Nearly everyone has the potential to be financially secure. Where most find trouble is often due to not having a plan or not sticking to the plan. A few simple principles can guide your finances, setting you up for a future where you have freedom to choose the life you envision.

  • Pay yourself first. Starting early and continuing as your earnings grow, begin the habit of paying yourself first. Simply, this means putting away some money every month or every paycheck that can help you reach your financial goals over time. Ideally, this money will be invested where it can grow. The goal is to get the money out of harm’s way, where you would have to think twice before dipping into your savings before you spend.
  • Develop a budget and consider expenses carefully. Think about expenditures before opening your wallet and swiping that credit card. Avoid debt wherever possible. Most people are able to have more money left over at the end of the month than they might realize. Don’t be afraid to tell yourself “no” so you can reach a bigger goal.
  • Plan for loved ones with life insurance. Here is where the value you provide your family through your hard work comes into sharp focus. Life insurance is essentially income replacement, should the worst happen. Meet with your financial professional and put a tailored-to-you life insurance policy in place that assures your family or dependents are taken care of.

Put your skills to work as a leader
Once you’ve established a level of financial security, now is the time to think about giving back by providing opportunities and helping others to realize their goals. There’s an old saying: “You’ll never get rich working for someone else.” While that’s not always true, trying to realize your long-term financial goals in an entry-level position might be an uphill climb. Moving up into a leadership position can teach you new skills and can increase your earning power. The average salary for managers approaches six figures!

You might even be ready to branch out on your own, investing the knowledge and leadership skills you’ve gained over the years in your own venture. Consider becoming an entrepreneur with your own financial services business – this can allow you to help others while building on your continuing success as a financial professional.

Whether you choose to strike out on your own, start a new part-time business, or grow within the organization or industry you’re in now, there are key traits that will help you succeed. Having a future-driven, forward-thinking mindset will guide your decisions. Your sense of commitment and the leadership skills you’ve honed on your journey will define your career – and perhaps even your legacy – as others learn from your example and use the same principles to guide their own success.

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May 6, 2019

Quick Guide: Life Insurance for Stay-at-Home Parents

Quick Guide: Life Insurance for Stay-at-Home Parents

Life insurance is vitally important for any young family just starting out.

Milestones like buying a home, having a baby, and saving for the future can bring brand new challenges. A solid life insurance strategy can help with accommodating the needs of a growing family in a new phase of life.   A life insurance policy’s benefits can

  • Replace income
  • Pay off debt
  • Cover funeral costs
  • Finance long-term care
  • And even more, depending on the type of policy you have.

And replacing family income doesn’t only mean covering the lost income of one earning parent.

Replacing the loss of income provided by a stay-at-home parent is just as important.   According to Salary.com, if a stay-at-home mom were to be compensated monetarily for performing her duties as a mother, she should receive $143,102 annually. That number factors in important services like childcare, keeping up the household, and providing transportation. Sudden loss of those services can be devastating to the way a family functions as well as expensive to replace.

Stay-at-home parents need life insurance coverage, too.

Contact me today to learn more about getting the life insurance coverage you need for your family and building a financial plan that will provide for your loved ones in case a traumatic life event occurs.

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April 29, 2019

What Happens If a Life Insurance Policy Lapses?

What Happens If a Life Insurance Policy Lapses?

The dollar amount of death benefit payouts that seniors 65 and older forfeit annually through lapsed or surrendered life insurance policies is more than the net worth

That’s $112 billion worth of death benefits, inheritance, donations to charities, and cash value down the drain. Or, more specifically, that’s $112 billion that goes right back to insurance companies – all because policyholders surrendered their policies or allowed them to lapse.

A lapse in a life insurance policy occurs when a premium isn’t paid. There is a brief grace period in which a premium payment for a life insurance policy can still be made. But if the payment is not made during the grace period, the life insurance policy will lapse. At this point, all benefits are lost.

There are circumstances in which the life insurance policy can be recovered. It could be as simple as resuming premium payments… or it could involve a lengthy process that includes a new medical exam, repaying all premium payments from the lapsed period, and possibly the services of an attorney.

The best practice to avoid a policy lapse is to make premium payments on time. To help out their customers, many insurance companies can automatically withdraw the monthly payment from a checking account, and some companies may take missed premium payments out of the policy’s cash value – but please note: term life insurance has no cash value. In this case, missed premium payments won’t have the cash value failsafe.

If you’re in danger of a lapse, contact me today. Together we can review your financial strategy to help you and your loved ones stay covered.

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April 17, 2019

Handling your car loan like a boss

Handling your car loan like a boss

Cars may be necessary to get around, but they can be expensive.

At some point, many of us will need to finance a car. Coming up with enough cash to buy a car outright – even a used car – can be difficult. Enter the auto loan.

Financing a car isn’t all bad, especially if you follow a few best practices that can help keep your car loan in good shape. Avoiding the dreaded upside down car loan – owing more on your car than it’s worth – is the name of the game when it comes to a good automobile loan.

Why do car loans go upside down?
Being upside down on your car loan is surprisingly common. It happens to many of us, and the root cause is depreciation. Depreciation is the decline in value of a good or product over time. Many physical goods depreciate – furniture, electronics, clothing, and cars.

There is a saying that a car begins depreciating as soon as you drive it off the lot. Unlike a good such as fine art or precious stones that you would expect to appreciate over time, a car usually will lose its value over time.

For example, say you buy a new car for $25,000. After three months your car depreciates by $3,000, so it’s now worth $22,000. If your down payment was less than $3,000 or you didn’t use a down payment at all, you are now upside down – owing more money on your car than it’s actually worth.

Some cars, however, hold their value better than others. Luxury cars have a slower depreciation rate than an inexpensive compact car. The popularity of a vehicle can also affect depreciation rates.

What happens when you’re upside down on a car loan?
Being upside down on your car loan may actually not mean much unless you’re involved in a loss and your car gets totaled. Assuming you have proper auto insurance, your policy should pay out the actual cash value of your totaled vehicle, which may not be enough to pay off the remaining balance of your auto loan. Then you’re stuck paying the balance on a loan for a car that you don’t have anymore. That is why it’s essential to avoid being upside down in your car loan.

Strategies to keep your car loan healthy
Keeping your car loan right side up starts with putting a healthy down payment on your car. Typically, a 20 percent down payment may give you enough equity right off the bat to keep your car loan from going upside down when the vehicle begins depreciating. So, if you’re purchasing a $25,000 car, aim to put at least $6,000 down.

Another way to avoid being upside down on your car loan is to select the shortest repayment term possible. If you can afford it, consider a 36-month repayment plan. Your monthly payments may be a bit higher, but the chances of your loan going upside down may be less.

Choose carefully
Keeping your car loan from going upside down is important. Make sure you have a healthy down payment, shop for vehicles within your budget, and stick to the shortest repayment term you can afford. Simple strategies can help make sure your car loan stays in the black.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

April 15, 2019

Is a home really an investment?

Is a home really an investment?

The housing market has experienced major peaks and valleys over the past 15 years.

If you’re in the market for a new home, you might be wondering if buying a house is a good investment, or if it even should be considered an investment at all…

“Owning a home is the best investment you can make.”
We’ve all heard this common financial refrain: “Owning a home is the best investment you can make.” The problem with that piece of conventional wisdom is that technically a home isn’t an investment at all. An investment is something that (you hope) will earn you money. A house costs money. We may expect to save money over the long term by buying a home rather than renting, but we shouldn’t (typically) expect to earn money from buying a home.

So, a home normally shouldn’t be considered an investment, but it may offer some financial benefits. In other words, buying a home may be a good financial decision, but not a good investment. A home may cost much more than it gives back – especially at the beginning of ownership.

The costs of homeownership
One reason that buying a home may not be a good investment is that the cost of homeownership may be much higher than renting – especially at first. Many first time homebuyers are unprepared for the added expense of owning a home, plus the amount of time maintaining a home may often require. First-time homebuyers must be prepared to potentially deal with:

  • Higher utility costs
  • Lawn care
  • Regular maintenance such as painting or cleaning gutters
  • Emergency home repairs
  • Higher insurance costs
  • Private Mortgage Insurance (PMI) if you don’t provide a full 20 percent down payment

A long term commitment
Another problem with considering a house as an investment is that it may take many years to build equity. Mortgages are typically interest heavy in the beginning. You can expect to be well into the life of your mortgage before you may see any real equity in your home.

Having the choice to move without worrying about selling your home is a benefit of renting that homeowners don’t enjoy. The freedom to move for a career goal, romantic interest, or even just a lifestyle choice is mostly available to a renter but may be out of reach for a homeowner. So, be sure to consider your long term goals and aspirations before you start planning to buy a house.

When is buying a home the right move?
Buying a home in many cases can be an excellent financial decision. If you are committed to living in a specific area but the rent is very high, homeownership may have some benefits. Some of those may be:

  • Not having a landlord make decisions about your property
  • Tax savings
  • Building equity
  • A stable place to raise a family

Buying a home: Not always a good investment, but may be a good financial decision
Although buying a home may not pay you in high returns, it can be an excellent financial decision. If owning a home is one of your dreams, go for it. Just be aware of the costs as well as the benefits. If you’ve always wanted to own your own home, then the rewards can be myriad – dollars can’t measure joy and the priceless memories you’ll create with your family.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, realtor, and/or tax expert to discuss your options.

February 18, 2019

Do you use the 20/4/10 rule?

Do you use the 20/4/10 rule?

If you’re in the market for a new car, you may already be aware that the average cost of a new car is about $35,000.

This pricetag has been increasing steadily in recent decades.[i] As a result, there are some “new” loan options that allow you to spread out your payments for up to 7 years.

Having a longer time to pay back your auto loan may seem like a great idea – stretching out the loan period may lower the payments month-to-month, and help squeeze a new car purchase into your family budget without too much financial juggling.

Reality check
One thing to keep in mind is that cars depreciate faster than you might imagine. Within the first 30 days, your new car’s value will have dropped by 10%. A year later, the car will have lost 20% of its value. Fast forward to 5 years after your purchase and your car is now worth less than 40% of its initial cost.[ii]

If you go with a longer loan term, it will take that much more time to build equity in the vehicle. A forced sale due to an emergency or an accident that totals your vehicle may mean you’ll still owe money on a car you no longer have. (This is what’s meant by being “upside down” in a loan: you owe more than the item is worth.)

If you’re not sure what to do, consider the 20/4/10 rule.

1. Try to put down 20% or more. Whether using cash or a trade-in that has equity, put down at least 20% of the new vehicle’s purchase price. This builds instant equity and may help you stay ahead of depreciation. Also add the cost for tax and tags to your down payment. You won’t want to pay interest on these expenses.

2. Take a loan of no longer than 4 years. Longer term loans may lower the monthly payments, but feeling like you need a loan term of more than 4 years may be a red flag that you’re buying more car than you can comfortably afford. With a shorter term loan, you may get a better interest rate and pay less interest overall because of the shorter term. This may make quite a difference in savings for you.

3. Commit no more than 10% of your gross annual income to primary car expenses. Your primary expenses would include the car payment (principal and interest), as well as your insurance payment. Other expenses, like fuel and maintenance, aren’t considered in this figure. The 10% part of the 20/4/10 rule may be the most difficult part to follow for many households considering purchasing a new car. Feeling pinched if you go with a new car could suggest that a reliable used car may be a better financial fit.

Cars are often symbolic of freedom, so it’s no wonder that we sometimes get emotional about car-buying decisions. It’s often best – as with any major purchase – to take a step back and look at the numbers and how they would affect your overall financial strategy, budget, emergency fund, etc. The money you save if you need to go with a used car could be used to build your savings or treat your family to something special now and then – and you’ll enjoy the real freedom of not being a slave to your monthly auto payment.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.prnewswire.com/news-releases/average-new-car-prices-jump-2-percent-for-march-2018-on-suv-sales-strength-according-to-kelley-blue-book-300623110.html
[ii] https://www.carfax.com/blog/car-depreciation

February 13, 2019

How to know when you need life insurance

How to know when you need life insurance

You might expect someone in the insurance business to tell you that anyone and everyone needs life insurance.

But certain life events underscore the reasons to secure a policy or to review the coverage you already have in place, to help ensure that it’s structured properly for your needs going forward.

Following are some of them…

You got married. Congrats! If you have a life insurance policy through your employer, it probably won’t provide enough coverage to replace your income for more than a year or so if you pass unexpectedly. (You might want to find out the specifics for your policy.) It’s time to get a quote and learn your coverage options now that you have a spouse.

You started a family. Having children is a responsibility that lasts for decades – and costs a lot. The average cost of raising a child until age 17 is estimated at $285,000.[i] Families with children have an average of 1.9 kids[ii], which nearly doubles those long-term costs. (That figure doesn’t include college tuition, fees, room and board, etc.) It’s time to consider a coverage strategy.

You bought a house. We don’t always live in the same house for the length of a mortgage, but a mortgage is a long-term commitment and one that needs to be paid to help ensure your family has a roof over their heads. In many cases, two incomes are needed to cover the mortgage as well as life’s other expenses. Buying a home is among the top reasons families buy life insurance.

You started a business. Congrats, again! Starting your own business may be a terrific way to build your income, but it isn’t without risk. Business loans are often secured by personal guarantees which may affect your family if something were to happen to you. Also consider the consequences if you aren’t around to run the business. How much time and money would be needed to find a replacement or to close the business down? All things to consider when looking for coverage.

You took on debt. Any sizeable debt can be a reason to consider purchasing life insurance. When we die, our debt doesn’t die with us. Instead, it’s settled out of our estate and paying that debt may require liquidating savings, selling assets, or both. In some cases, family members may be on the hook for the debt, particularly if the only remaining asset is the home they still live in. Life insurance can help put a buffer between creditors and your family, helping prevent a difficult financial situation. Your birthday is coming. Seriously. Life insurance rates may be more affordable now than they’ve been in the past – but every year you wait may cost you money in the form of higher premiums. Life insurance rates go up with age.

It never hurts to take some time and review the coverage that you have in place. To be sure, life insurance can be an essential part of a financial strategy and help provide a safety net for your family if something were to happen to you.

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[i] https://smartasset.com/retirement/the-average-cost-of-raising-a-child
[ii] https://www.statista.com/statistics/718084/average-number-of-own-children-per-family/

January 21, 2019

Preparing to buy your first home

Preparing to buy your first home

Home buying can be both very exciting and very stressful.

Picking out your dream home is thrilling, but credit scores, applications, and mortgage underwriting requirements? Well, not so much. Don’t let yourself be deterred. Here are a few moves to make before you amp up your home buying search that will help increase the fun and decrease the stress.

Know what you can afford
One of the first steps to home buying is knowing how much you can afford. Some experts advise that a monthly mortgage payment should be no more than 30% of your monthly take-home pay. Some say no more than 25%. If you stretch past that you could become “mortgage poor”. Consider this carefully. You might not want to be in your dream house and struggling to pay the utility bills, grocery bills, etc., or find yourself in a financial jam if an emergency comes up.

Get your finances ready for home buying
If you’re scouring listings, hunting for your dream home, but you’re not sure what your credit score is – stop. There are few things more disappointing than finally finding your dream home and then not having the financial chops to purchase it. You’ll need to get your finances in order and then start shopping. Focus on these areas:

Credit score: Your credit score is something you should know regardless of whether you’re home shopping. Usually, to get the best mortgage rates, you’ll want a score in the good to excellent range. If you’re not quite there, don’t despair. If you make payments toward your other obligations on time and pay off any debt you’re carrying, your credit score should respond accordingly.

Down payment: A conventional mortgage usually requires a 20 percent down payment. That may seem like a lot of money to come up with, but in turn, you may get the best interest rates, which can save you a significant amount over the life of the mortgage. Also, anything less than 20 percent down and you may have to purchase Private Mortgage Insurance – it’s a type of insurance that protects the lender if you default. Try to avoid it if you can.

Get pre-qualified before you shop for a home
Once you have your credit score and down payment in order, it’s time to get pre-qualified for a mortgage. A prequalification presents you as a serious buyer when you make offers on houses. Mortgage pre-approval doesn’t cost you anything, and it doesn’t make you obligated to any one house or mortgage. It’s just a piece of paper that says a bank trusts you to pay back the loan.

If you go shopping without a pre-approval, expect to get overlooked if there are other bidders. A seller will likely go with the buyer who has been pre-approved for a mortgage.

Prepare your paperwork
Getting approved for a mortgage is going to require you to do a little legwork. The bank will want to see documentation to substantiate your income and lifestyle expenses. Be prepared to cough up income tax documents such as W-2’s, paystubs, and bank statements. The sooner you get the paperwork together, the easier it will be to complete the mortgage application.

Shop for the best mortgage
Mortgage rates differ slightly depending on the lender, so shop for the lowest possible rate you can get. You may wish to use a mortgage broker to help. Also, get familiar with mortgage terms. The most common household mortgages are a 30-year term with a fixed rate, but there are 15-year terms, and mortgages with variable interest rates too.

Do your pre-home-buying homework
With a little legwork early on, home buying can be fun and exciting. Get your finances in order and educate yourself about mortgage options and you’ll be decorating your dream home in no time.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

January 21, 2019

Do you know your net worth?

Do you know your net worth?

Usually when we think of net worth we imagine all the holdings of a wealthy tycoon who owns several multi-million dollar businesses.

Or a young heiress on the New York social scene, or a successful blockbuster movie actor.

However, you have a net worth too. Essentially, your net worth is a personal balance sheet of your assets and liabilities, not unlike the balance sheets used in business.

Calculating your net worth
First, you’ll want to tally up all your assets. These would include:

  • Personal property and cars
  • Real estate equity
  • Investments
  • Vested retirement plans
  • Cash or savings
  • Amounts owed to you
  • Cash value of life insurance policies

Next, you’ll calculate your liabilities (amounts you owe someone). These would include:

  • Loans
  • Mortgage balance
  • Credit card balances
  • Unpaid obligations

Your total liabilities subtracted from your total assets establishes your net worth.

The number could be positive, or it could be negative. Students, for example, often have a negative net worth because they may have student loans but haven’t had much of a chance to build personal assets yet.

It’s also important to realize that net worth isn’t always equal to liquid assets. Your net worth includes non-liquid assets, like the equity in your home.

What should your net worth be?
The notion that you should be at a certain net worth by a certain age is mostly arbitrary; wealth is relative. Having a hundred thousand dollars stashed away might sound like a lot, but if you live in an affluent area or have a large family to provide for, it may not last long if your job disappears suddenly. In other situations, the same hundred thousand dollars might be a fabulous starting point to a growing net worth.

Net worth can be a way of “keeping score”, but it’s important to remember the game is one in which you are the only player and you’re playing to best yourself. What someone else has or doesn’t have isn’t relevant to your needs and your future goals for your family.

Looking ahead
Measuring your net worth can be a strong motivation when saving for the future. Do you want to be a certain net worth by a certain age? Not if the number is pulled out of thin air. If your net worth marks progress toward a well-reasoned goal, however, it’s extremely relevant.

When you’re ready to put together a personalized plan based on your net worth and (more importantly) your future goals, reach out anytime. We can use net worth as a starting point and a measurement tool, while keeping squarely focused on the real target: your long-term financial strategy.

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December 17, 2018

Permanent or Term Life: Which is right for you?

Permanent or Term Life: Which is right for you?

Life insurance has many benefits.

Most people purchase life insurance to serve as a safety net for the financial health of their family if something happens to them as the primary provider. A life insurance policy in such cases could be used for funeral costs, medical bills, mortgage payments, or other expenses.

You’re finally convinced you need a life insurance policy, and you’re ready to buy. But what do you need exactly? What type of life insurance is best for you?

When preparing to purchase life insurance, there are two main types of policies to consider – permanent and term. Read on for a short primer on the differences and which one may be right for you.

Term life insurance at a glance
Term life insurance offers life insurance coverage for a set amount of time – the “term”. If you pass away during the term, the policy pays out to your beneficiary. A term policy is sometimes called a pure life policy because it doesn’t have financial benefits other than the payout to your dependents should you die within the term.

There are different terms available depending on your needs. You could purchase a term life policy for 10, 20, or 30 years.

Term life insurance pointers
When purchasing a term life policy, consider a term for the number of years you’ll need coverage. For example, you may want life insurance to provide for your child in case you die prematurely. So, you may select a 25-year term. On the other hand, you may want a life insurance policy to help with the mortgage should something happen to you. In this case, you may opt for a 30-year term which will expire when your mortgage is paid off.

You’ll need to purchase enough insurance to cover your family’s needs if something happens to you and you cannot provide for them. Term life insurance benefits could serve as income replacement for your wages, so buy enough to pay for the expenses your paycheck covers.

For example, if you cover the mortgage, car payment, and child care, make sure the term life policy you purchase can cover those expenses.

Term life insurance policies when appropriately used should expire around the time the need for them goes away, such as when your children are self-sufficient, or your mortgage is paid off.

Permanent insurance at a glance
This type of policy can provide coverage for your entire life, unlike a term policy that expires at a set time. A permanent life policy also contains an investment benefit which is known as the policy’s cash value. The cash value of a permanent life policy grows slowly over time but is tax-free (provided you stay within certain limits), so you don’t pay taxes on the accumulating value.

A permanent life policy can be borrowed against. You can borrow against the cash value, but you must abide by the repayment terms to keep the policy payout unchanged.

Some permanent life insurance policies offer dividends. The dividends are paid to the policyholders based on the insurance company’s financial profits. Policyholders can take dividends in the form of cash payouts or use them to earn interest, payback a loan on the policy, or purchase additional life insurance coverage.

Some of the key points regarding permanent life insurance include:

  • The premium can remain the same throughout the policy term if you abide by the conditions and terms in the policy
  • The policy offers a guaranteed death benefit

Cost of life insurance
Term life insurance is generally less expensive than permanent life insurance because the policy has a pre-selected term. Permanent life insurance, on the other hand, covers the insured for their entire lifespan, so you can expect premiums to be higher.

Which life insurance policy is right for you?
If you aren’t sure which policy is right for you, talk to a qualified financial professional who can help you find the right type of life insurance policy to meet your goals and budget.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

December 17, 2018

How much will this cost me?

How much will this cost me?

If you’re dipping your toe in the pool of life insurance for the first time, you’re bound to have a lot of questions.

At the top of your list is probably how much setting up a policy is going to cost you.

There are several things that can determine how much you’ll pay for life insurance, including the type of policy you select. But before we dive in and look at cost, let’s check out the types of life insurance available.

Major types of life insurance
Life insurance is customizable and can suit many different needs, but for the most part, life insurance comes in three main varieties.

Term life insurance: A term life policy is active for a preselected length of time. It could be 15, 20, or 30 years. If something happens to you during that term, your beneficiary will receive the death benefit of the policy.

Permanent life insurance: Permanent life insurance is a policy that stays active as long as you’re alive. When you pass away, the policy pays out to your named beneficiary. The value of the policy increases over time, and you can borrow against this “cash value” in some circumstances.

Universal life insurance: Universal life insurance works like a permanent life policy in that it pays out to your beneficiary, but it also accrues interest over the policy term (which may be affected by market performance).

How your cost is calculated
The insurance company estimates the cost of a life insurance policy based on your risk factors. Risk factor data is gathered and evaluated based on the information in your application. Then the insurance company uses historical data, trends, and actuarial processes to come up with a premium for you.

The cost of some life insurance policies can change over time, while others remain the same.

What risk factors does the company use?
When the insurance company is calculating your rate, they look at several factors, including:

Your demographics: Your demographics include your age, weight, gender, and health. The company will also want to know if you smoke, and other health-related issues you may have.

The amount of the death benefit: The death benefit is the amount the policy will pay to your beneficiaries when you pass away. The larger the death benefit you select, the more expensive the policy.

Your lifestyle: Lifestyle habits and hobbies can affect the cost of your policy. The insurance company will want to know if you ride a motorcycle regularly, or how often you drink alcohol, for example.

Your risk and life insurance cost
The risk of when your death will occur ultimately determines your life insurance costs. That’s why the younger you are the less the policy should cost. If you wait to purchase your life insurance policy when you’re older, the policy will most likely cost more.

But there are things you can do that may help lessen the cost of the policy. Anything that will increase your health status may help with your life insurance costs. Quitting smoking and starting a regular exercise program can promote your health and in turn this may also have a positive effect on your health insurance premium.

A life insurance agent can help
If you’re looking for a life insurance policy and wondering about the cost, a qualified life insurance agent can be a great help. A life insurance agent has access to many different insurance companies and can work to get you matched with the right policy at the right price for you.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

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